M is for Money

Taxes, love them or hate them, are a necessary evil of organized society. But that doesn’t mean you have to pay more than your fair share. There are plenty of legal ways to reduce your tax burden, but you have to act fast. Most tax moves must be made before the clock strikes midnight on New Year’s Eve for you to see the benefit in your 2009 taxes.

Send in that Mortgage Payment

Mortgage interest is deductible in the year that it is paid, so make sure to pay January 1, 2010’s bill before the end of December. This is one of my favorites, just be sure you have the funds to make the payment early.

Pay Your 2009 Taxes

In many cities your 2009 property taxes aren’t due until 2010, but if you pay them before the end of the year you can deduct them from your 2009 taxes. Plus you’ll make your city’s tax collector very happy.

Charitable Donations

All charitable donations must be in the hand of the charity by midnight on December 31. Cash and donated goods are all tax deductible, though keep in mind the IRS changed the rules on used clothing. All clothing must be in decent condition to qualify for a deduction, no more turning in your old rags.

Add to Your Retirement Accounts

Retirement accounts are one of the best ways to save for the future while reducing your tax burden today. You can increase your 401k contributions for that last paycheck of the year or open an IRA (check the rules, IRAs are not deductible if you are covered by a work retirement plan AND make over a certain income). You actually have until April 15, 2010 to fund a 2009 IRA. Also, keep in mind Roth IRAs are not tax deductible!

Get Married

Many couples will see their total tax bill reduced once they get married, usually in couples where one spouse earns significantly more than the other. So head on down to the courthouse and get hitched before midnight on New Year’s Eve, the IRS will treat you like you were married the entire year.

Have a Baby

OK, so you did have to get started on this one awhile ago. But if you have a little one due around the end of the year, you can hope they make it into the world before New Year’s Day. I’ve heard there are some things you can do to move things along, ha ha. Again it doesn’t matter if the little tyke is born at 11:59 pm on December 31, you will get the entire deduction for 2009.

Sell Some Stock

Even though the stock market has rebounded in 2009, many of us still have some losers in our portfolio. Stock and mutual fund losses are tax deductible, you can write off as much as $3000 this year, and carry forward any loss above that amount to future tax years.

Medical Expenses

Unfortunately medical expenses are only deductible once they reach 7.5% of your adjusted gross income. But if you’ve had an expensive year in the health department and crossed that threshold, you should get any other procedures or office visits out of the way before the end of the year.

Buy a New Car

This year’s economic stimulus includes some rather unusual tax deductions meant to encourage consumption. For 2009 only, you can deduct the sales tax on new car purchases even if you don’t do itemized deductions or you deduct your state income taxes instead.

Make Home Improvements

For both 2009 and 2010 there are tax breaks for making home efficiency upgrades. The amount of the deduction depends on the type of improvement.

Take Advantage of Tax Deductions

No one likes paying taxes, fortunately our system has a lot ways you can reduce the pain. You still have a few weeks left before the end of the year to deal with your tax situation, so take advantage of these deductions before time runs out. As with any government program, there are lots of rules. Check the specifics on what qualifies for a deduction along with the income phaseouts before you take advantage of one of these programs.


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